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please solve using Excel thanks in advance DDD is an unlevered firm with a cost of capital of 10.7%. The company is considering adding debt
please solve using Excel thanks in advance
DDD is an unlevered firm with a cost of capital of 10.7%. The company is considering adding debt to its capital structure to reduce equity. Specifically, the company is evaluating the consequences of adding $4 million in perpetual debt at a pre-tax cost of 5.1%. The firm expects to generate EBIT of $10 million every year into perpetuity. Assume interest expense is tax deductible. The firm pays a tax rate of 35%. Ignore financial distress costs. Based on MM Prop II, what will be DDD's weighted average cost of capital if it takes on the debtStep by Step Solution
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